With the new year already underway, there’s no better time to take meaningful steps toward securing your company’s future. For business owners, succession planning isn’t just about exiting—it’s about creating a lasting legacy, ensuring business continuity, and protecting employees who have contributed to its success. A well-structured transition, such as an Employee Stock Ownership Plan (ESOP), can help achieve these goals while providing financial and tax advantages.
Every business owner will eventually face the question: What happens next? A solid ESOP succession plan ensures stability for employees, customers, and stakeholders while allowing owners to transition on their terms. Yet, without a clear roadmap, planning for a business transition often takes a backseat to daily operations.
If you’re considering selling your business to employees through an ESOP or exploring another transition strategy in 2025, these five resolutions will help you move forward with confidence.
1. Build the Right Team of Advisors
A successful transition depends on assembling a knowledgeable team of trusted advisors to guide you through the process.
Your Internal Team: The people who know your business best—its key employees—are invaluable to a smooth ownership transition. These trusted individuals understand the company’s operations, culture, and long-term goals, making them essential for maintaining stability during an ownership transition.
Your External Advisors: Exit strategies require specialized expertise; your CPA, financial advisor, attorney, and estate planning team all play critical roles. At Lazear, our multidisciplinary team, which includes attorneys, CPAs, tax experts, financial analysts, and more, is structured to understand and work alongside your advisors. Together, we’ll craft a transition plan that maximizes your wealth.
2. Get Your Financial House in Order
Accurate financial reporting is essential—especially when considering a sale to an ESOP or any other exit strategy.
Financial Statements: Work with your CPA to ensure your statements are accurate and up to date. Reviewed or audited statements from an independent third party add credibility to your business valuation.
Financial Forecasting: Buyers want to see sustainable growth and profitability, especially when considering a company’s ability to support employee ownership. Develop financial projections that demonstrate the company’s long-term success.
3. Align the Sale with Your Personal and Financial Goals
Selling a business isn’t just a financial decision—it’s a personal one. Understanding your post-sale vision helps shape the best exit strategy.
Personal Goals: Consider your plans after the sale—whether it’s retirement, starting a new venture, or focusing on personal interests. Do you want to stay involved with the company post-sale? Is there a next generation of management ready to take over? Understanding your goals will guide the sale terms and help determine if a third-party sale or an ESOP is the right fit.
Financial Goals: Assess your financial needs and expectations from the sale, such as setting a target price, understanding tax implications, and planning for wealth management afterward. Consider whether you prefer receiving more cash upfront or if you’re open to a different payment structure. Our team considers your personal and financial goals to identify an exit strategy that maximizes your wealth.
4. Understand Legal and Tax Implications
Transitioning ownership offers an opportunity to manage legal and tax considerations proactively.
Key Agreements: Ensure all critical business documents—corporate formation papers, contracts, leases, and employment agreements—are organized and up to date. If you’re unsure where to begin, your corporate legal counsel can guide you through the process.
Tax Planning: Selling your business is a major step, and having tax questions is normal. Work with advisors to structure the sale in a way that considers your personal tax situation and maximizes advantages.
Did you know? As the most sophisticated tax strategists in the Employee Stock Ownership Plan community, we have developed solutions that save our clients millions of dollars as compared to other solutions.Regulatory Compliance: Adhering to industry regulations, licensing requirements, and business laws is always crucial, but it’s especially important when selling your business. Properly documenting and managing these regulatory aspects is key, and a qualified advisor will ensure this is handled carefully.
5. Communicate and Execute Your Transition Plan
A well-structured transition minimizes disruption and reassures employees, customers, and stakeholders.
Internal & External Communication: A clear transition plan that outlines roles, responsibilities, and timelines will reassure all stakeholder while maintaining trust and stability.
Owner Transparency: Business owners often hesitate to share their reasons for selling, but being transparent can build trust and strengthen commitment to the company’s future.
Looking Ahead
A well-executed succession plan, with your goals at its core, not only secures the future of your business but also honors the legacy you’ve built as an entrepreneur.
